ECF Solutionshttp://ecfsolutions.co.uk
The Equity Crowd Funding ExpertsWed, 21 Nov 2018 13:45:47 +0000en-US
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1 https://wordpress.org/?v=5.2.1105165967At last the launch of our new Crowdfunders Information Resourcehttp://ecfsolutions.co.uk/2018/11/21/at-last-the-launch-of-our-new-crowdfunders-information-resource/
Wed, 21 Nov 2018 13:45:47 +0000http://ecfsolutions.co.uk/?p=389 We are happy to announce that we are now Crowdfunding the creation of a brand new site for all people interested in Equity Crowdfunding – ECF.Buzz. You can join us and help create an investor led platform to enable […]

]]>387Hummus Bros collapse illustrates a real problem with Equity Crowdfunding not addressed by the platformsshttp://ecfsolutions.co.uk/2018/06/27/hummus-bros-collapse-illustrates-a-real-problem-with-equity-crowdfunding-not-addressed-by-the-platformss/
Wed, 27 Jun 2018 10:35:02 +0000http://ecfsolutions.co.uk/?p=381We have been saying this for 7 years – taking a nice little business and scaling it is not always a good idea. Equity Crowdfunding demands scale. QED ECF is not always a good idea. Hummus Bros was a small […]

]]>We have been saying this for 7 years – taking a nice little business and scaling it is not always a good idea. Equity Crowdfunding demands scale. QED ECF is not always a good idea.

Hummus Bros was a small business, running for 7 years before it started to use equity crowdfunding. It took £600k off Seedrs investors to grow large. Now it has collapsed – blaming all sorts of reasons but the one that did it in.

For example, in the letter to SHs, the company blames the fall in the pound after the Brexit vote. However the second Seedrs round was in 2017, so after that vote and collapse. Did they mention this then – NO.

To put it simply for you, this was a business that might have made the owners a living and paid its staff and dues. It was not a business to scale and in the old days a bank manager, whose job was on the line if he got it wrong, would have said so. They wouldnt have scaled as they wouldnt have been funded. They would have continued for many years happily running their 2 or 3 outlets. Since the funding started coming in in 2015, the only consistent rise for the business has been the magnitude of its losses.

ECF platforms are not in the habit of turning away businesses with a little sex appeal and the restaurant trade has always been considered that – despite the failure of so many.

So who is really to blame. Its a mix between the actions and reactions induced by ECF – need to scale and need to exit. The lack of business sense of most of the investors on these platforms. The lack of the management team to do scaling and in the end the false idea that this was ever achievable.

At some stage more people will wake up to these facts and ECF will alter direction for the better. It’s not happening yet though. So you can expect this example to be repeated many times more.

]]>365New ECF Research reveals flaws in Crowdcube analysishttp://ecfsolutions.co.uk/2017/04/24/new-ecf-research-reveals-flaws-crowdcube-analysis/
Mon, 24 Apr 2017 11:11:45 +0000http://ecfsolutions.co.uk/?p=358You will soon be able to read our new research – you can read about it here in The Times https://t.co/95DwWuLTv8 today.

]]>358FCA Interim Report misses the markhttp://ecfsolutions.co.uk/2016/12/15/fca-interim-report-misses-mark/
Thu, 15 Dec 2016 17:29:27 +0000http://ecfsolutions.co.uk/?p=351 So now we have the FCA’s interim report on alternative finance. Will it make any difference? In the 21st century, you would have thought we might have learnt how to engage regulation with a new vibrant form of business […]

So now we have the FCA’s interim report on alternative finance. Will it make any difference?

In the 21st century, you would have thought we might have learnt how to engage regulation with a new vibrant form of business finance. From the outcome of this turgid, starchy interim report from the FCA, its clear we have not.

For starters, if you look at the who the FCA are asking for input, it is mainly those parties with the most interest in minimal interference. So much so in fact, that this is one of the more inane comments that The FCA saw fit to include in the report –

Other matters 4.21

Five industry respondents said the FCA should not refer to blogs ((: and market commentators in the media, which may be sensationalised or subject to their own conflicts of interest. Instead, they recommended we focus on industry data.

Our response (FCA not us!)

We will continue to analyse due diligence standards in the ongoing post implementation review. As set out in Chapter 5, we are considering consulting on further rules on disclosure and may consider options for specific disclosures about the due diligence process, even if we do not go on to prescribe minimum due diligence standards.

To gain a rounded picture of the market, we will continue to consider all sources of data, including social media, consumer feedback and media commentary but will not give undue weight to any one source of information.

The key problem for the FCA is that they are looking to control the investors rather than the platforms. They try to limit the access to the platforms but under voluntary guides rather than rules – this will never work. People are too arrogant and or ignorant to admit they are not capable of knowing what to invest in.

Control of the platforms in the form of making them more accountable, stopping them from using glossy advertising and restricting the use of third party FCA licences would be more appropriate here. This is business finance not some Saturday evening entertainment show.

Leave investors to fend for themselves – voluntary restrictions are doing that anyway. Get to grips with what the platforms offer investors and you will have a far better outcome. Crowdcube, the worst offender by far, is still producing the most ridiculous projections and valuations. Its advertising spend is massive and this is managing to hold the company up – despite the growing list of failures and lack of any real success. Their model needs to be banned – no due diligence, no post raise accountability, massive glossy misleading advertising, poor or non existent shareholder communications, poor or non existent S/EIS communications. But now we have Seedrs joining in with their Annual Portfolio Report, supposedly showing the majority of shareholders are doing well. It’s a total fabrication.

The FCA needs to get together with HMRC and come up a new way of SME’s filing accounts, listing their directorships etc etc. The current system is way behind the new business environment. Due diligence is made so much harder. As an example a recent pitch on Seedrs had a company looking for £1.5m as a loan. But the company was late filing accounts – so late it had had its first notice to be struck off. How does that happen? In fact this company had already moved its filing date, so it hadnt filed any accounts for 30 months. To add to the irony, the company declared it had applied for and was waiting for its FCA licence to allow it to carry out its main activity – raise money for businesses. Is someone taking the Michael?

The FCA seem powerless to do anything. They have kowtowed to big guns like Balderton, who have sunk large sums in to Crowdcube, and are now pussyfooting around the real issues.

Just by of example here is a little piece of the FCA report –

Due diligence standards on platforms 4.18

Three respondents said that current due diligence standards are below those that would be expected for professional investors but most respondents said that standards are appropriate.

‘Most’ said DD was appropriate. In the time we have been running this blog and for the 4 years prior to that, we have not come across an investor who thinks the DD is appropriate – it stinks. It isnt just below a professional standard, it is criminally negligent. That’s why we have companies going bust having never done a thing, why we have directors who are banned, why we have phoenixing like it was going out of fashion, why we have lies (promises) all over some pitches and why we have videos with fake entrepreneurs promoting the pitch. Platforms do not carry out anything but the briefest DD. It’s all catalogued in this blog – the blog that respondents didnt want the FCA to read.

Our guess is that the final FCA report will just like the 2015 effort – a hands off whitewash which leaves 99% of all this just as before.

]]>351Equity Crowdfunding investors becoming more sophisticatedhttp://ecfsolutions.co.uk/2016/07/17/equity-crowdfunding-investors-becoming-sophisticated/
Sun, 17 Jul 2016 16:04:35 +0000http://ecfsolutions.co.uk/?p=339Equity Crowdfunding investors are no longer willing to accept the sort of claims that guaranteed investment in the past. The sorts of claims that would have guaranteed you funding, now almost certainly guarantee you nothing. In fact there is evidence that […]

Equity Crowdfunding investors are no longer willing to accept the sort of claims that guaranteed investment in the past.

The sorts of claims that would have guaranteed you funding, now almost certainly guarantee you nothing. In fact there is evidence that these claims are now putting investors off.

For too long they have seen pitches make claims about hot order pipelines worth millions and deals with multinationals, only to find out two years later then none of these transpired.

So if you dont want to be the pitch at the bottom of the pile with only 10 investors completing 10% of your total and 2 days to go, give us a call and we can help you. You only get the one chance at equity crowdfunding and you want to get it right.

]]>339You dont need to fail with Equity Crowdfunding – if you talk to ECF Solutions first.http://ecfsolutions.co.uk/2016/04/30/dont-need-fail-equity-crowdfunding-talk-ecf-solutions-first/
Sat, 30 Apr 2016 17:45:11 +0000http://ecfsolutions.co.uk/?p=334We were contacted recently by an Equity Crowdfunding pitch that was live on Crowdcube. The pitch wasn’t doing very well and it was immediately obvious to see why. They asked us for advice but why would we give them a […]

]]>We were contacted recently by an Equity Crowdfunding pitch that was live on Crowdcube.You don’t want your campaign being derailed.

The pitch wasn’t doing very well and it was immediately obvious to see why. They asked us for advice but why would we give them a freebie when they hadnt bothered to contact us beforehand?

Nothing essentially wrong with the company but they had made a couple of fatal errors in the way they had presented it.

As we write they are almost certainly going to fail to even get to 50% so they will get nothing and this failure will sit on the internet for years. Crowdcube clearly had given them no advice about what are very obvious flaws in their plan – but I’m sure you will not be surprised by that.

So don’t take the chance; we offer a free service with the payment only due after you have raised the money. What have you to lose?

]]>334Crowdfinders hits most of the wrong notes for Equity Crowdfundinghttp://ecfsolutions.co.uk/2016/04/28/crowdfinders-hits-wrong-notes/
Thu, 28 Apr 2016 08:48:21 +0000http://ecfsolutions.co.uk/?p=329Crowdfinders hits most of the wrong notes for Equity Crowdfunding Crowdfinders latest event shows Equity Crowdfunding has a long way to go The opening scene was set in the historic auditorium, where almost 100 years earlier, Faraday had begun his […]

Crowdfinders latest event shows Equity Crowdfunding has a long way to go

The opening scene was set in the historic auditorium, where almost 100 years earlier, Faraday had begun his journey. He would have been a little surprised by the raging montage of Wall St and WoWS images and skyscrapper infographics projected and accompanied by thumping cocaine infused mussak. This was like Johnny Rotten serenading the Queen on her birthday. Mixed into this mayhem of the worst abuses of capitalism, was the message that Equity Crowdfunding is a to be taken seriously.

Somehow it was not very convincing.

This was closely followed by the Crowdfinders’ resident comic with the odd hair and eventually thank goodness, some slightly old fashioned sense from Lord Bilimoria. My initial thoughts were that I should get a grip and move with the times but on talking to delegates, the overall opinion was that this preppy style was passe and slightly desperate.

The first panel event didn’t make things any better. A question about the recent Rebus collapse, was met with a completely false statement from one of the panel of ‘experts’, that this company was definitely fraudulent. This went unchallenged by the chair or any of the other panellists, most of whom I suspect had never heard of Rebus. Rebus may have been fraudulent and then again it may not – we have no evidence yet either way. This was just grandstanding of the worst kind. It is also highly irresponsible – a theme that reoccurred throughout the day.

Walking the sponsors rooms revealed tables staffed by people who made me feel positively geriatric. As we have said here before equity crowdfunding requires experienced business people to run its portals, not interns just out of the university bubble. However The Mingling proved very useful. There are plenty of sensible investors and angels out there, I just wish they would stick their heads above the parapet now and then before it becomes too late.

A quick diversion of a culinary kind. I may have been out of the system for a while, but when did ramekins half filled with mini sausage and a teaspoon of potato get called ‘lunch’? Then again is was on the house so one shouldnt be ungrateful – especially as it was hard to find anyone who had paid for their ticket.

So what can we learn from Crowdfinders 2016?

Equity Crowdfunding, being a new internet based industry, has attracted the young guns and shunned experience – in the main. It will not last this way – investors who are now happy burning £1000 on a punt in order to feel they are part of the entrepreneurial elite, will become disillusioned with the crass way this is all being handled.

On the way home I watched the film The Big Short. As a holder of a substantial number of AIG shares in 2008, I knew what to expect. However I was not prepared for the multi layered denial that led to the crisis. Equity Crowdfunding is not another 2008 crash, but it has some close similarities and it’s time we learnt some lessons instead of making the same old dumb mistakes.

]]>329We are on a Road Trip to Crowdfindershttp://ecfsolutions.co.uk/2016/04/19/road-trip-crowdfinders/
Tue, 19 Apr 2016 17:22:39 +0000http://ecfsolutions.co.uk/?p=325We are travelling. Going to London for the Crowdfinders event and to meet with clients. The hope is that the gathering of most of the UKs ECf sector in one space will give everyone a chance to find out what […]

We are travelling. Going to London for the Crowdfinders event and to meet with clients.

The hope is that the gathering of most of the UKs ECf sector in one space will give everyone a chance to find out what is really happening – not the PRing version but the real one. And of course we will be letting you all know what we think next week.

Meanwhile, it looks as though another Crowdcube success story maybe in trouble. Jam Vehicles raised £165k but are now very late with their accounts and have had a GAZ1 stuck on them. Of course this maybe just because they are so busy that their accounts are now 3 months overdue.

An increasing amount of what we read on the UK ECF scene shows a distinct split in attitudes. Two totally different and non convergent views are emerging – it all depends at which end of the telescope you are standing. Those in the industry seem unable or unwilling to be frank about its very obvious flaws and those who view it from the outside with scepticism seem equally unwilling to see the enormous potential benefits if we can get it right.